Retirees. You need to understand that not taking your required distributions will cost you. Tax penalties for failing to take your RMD annually can range from $1100 to nearly $3000. The penalty is a 25% excise tax on the total amount that should have been distributed. If you don’t know how and when to take required minimum distributions from your tax-deferred retirement accounts, keep reading. 

Firstly, these distributions are required because the Government allowed you to delay paying on that income when you invested but want to collect their share. If you are in your 60s when you retire, you won’t need to worry about taking distributions right away, but you may choose to. It’s your money. Required distributions begin once you turn age 73. You can take them in installments or a lump sum. The amount of your required minimum distribution is based on the total amount in your account divided by life expectancy. At age 73 the standard life expectancy is 26.5. If you had $1,000,000 in your account, your RMD would be approximately $37,736. 

Millions of retirees fail to take their required distributions each year. How could that be? Likely because they don’t understand that it’s required of them. Or they know that it is required yet don’t take enough because they didn’t do the calculations correctly or make the withdrawals on time. A retiree who has various sources of income may not think they need to take a distribution from a retirement account and just not bother. Regardless, at Alloy Wealth, we feel that knowledge is power and the key to building and preserving wealth. 

If you have any questions about required distributions or retirement planning in general, we’d love to hear from you! Call 800-689-3935 to speak with one of our fiduciaries. Alloy Wealth Management has offices in Charlotte, N.C. and Greenville, S.C. and specializes in comprehensive, personalized financial planning for individuals and families. We focus on investment management, retirement planning, tax strategies, and estate planning.